When wiring money, many businesses don’t often realize that they have a choice in wire providers. Bank-to-bank wire transfers are the most accessible mode of transfer, although there are also wire transfer services out there, like Western Union.
What makes bank-to-bank wire transfers the de-facto choice for quickly moving large sums of money? Convenience, security and peace of mind are often worth the hefty sums that many institutions charge per transaction.
Here’s a look at the basics of a bank-to-bank wire transfer and why they continue to be a primary mode of funds transfer, even despite a rising trend toward digital payments.
The Benefits of a Bank-to-Bank Wire
First, let’s dive deeper into why bank-to-bank wire transfers are so widely used by businesses. Here’s a look at the most important benefits:
- Expedited transactions mean domestic funds can land same-day
- Bank wires are often the safest mode of international funds transfer
- Bank-to-bank wire transfers are handled only by sender and recipient institutions
- Some situations require the use of a bank-to-bank wire, as opposed to a wire service
- No need to wait for funds to clear, since you bank with the institution
For these reasons, businesses choose bank-to-bank transfers over wire transfer services. The expedience, security and institutionalized peace of mind that come from working with a trusted, vetted financial institution are difficult to pass up.
The Drawbacks of Wire Transfers
There are a few key drawbacks to bank-to-bank wire transfers. Here’s a look at what might dissuade many businesses from using them:
- Many banks charge outgoing or incoming wire fees, or both
- Bank-to-bank wire transfer fees tend to be expensive (avg. $25-30)
- It’s almost impossible to cancel wire bank-to-bank wires once executed
- Banks may require more information than a wire transfer service
- There’s lack of visibility in terms of exchange rates or transfer status
Some businesses choose a wire transfer service over a bank because it can be more affordable and there are fewer barriers to executing the transfer. Keep in mind that with these conveniences come risk. Banks often mitigate risk by putting more controls in place.
Domestic vs. International Bank Wires
Through banks, there are two types of wires a business can send: domestic or international transfers. Both function in the same way, moving large sums of money quickly and securely. However, as the name implies, one sends money within borders and the other transfers funds across borders. To send either, you’ll need the following information:
- Recipient full name
- Sender full name
- Recipient phone number
- Sender phone number
- Recipient address
- Recipient bank name and information
- Recipient checking account information
The biggest differences between a domestic vs. international wire are the time it takes to land funds and the fees associated with them. Most domestic bank wires land same-day or next-day, incurring an upfront fee. International wires, however, can take 3-7 days to land depending on the recipient’s country or bank. Moreover, they have both upfront costs and currency conversion costs attached to them. It’s best to check with your banking institution of choice to estimate the landed cost of an international wire transfer.
Outgoing vs. Incoming Wire Fees
Fees are a sticking point for bank-to-bank wire transfers. Put simply, the cost to send (and sometimes receive) money through a bank wire are expensive. While each bank is different, most tend to have a fee for sending a wire and a fee for receiving one, which can compound costs on both sides of the transaction.
- Banks charge between $5-$50 to send a domestic wire; the average is $25
- Banks charge between $15-$70 to send an international wire; the average is $50
- Banks charge between $10-$20 to receive a domestic wire; the average is $15
- Banks charge between $10-$20 to receive an international wire; the average is $15
As mentioned, there are also currency exchange rates to consider if you’re sending money internationally. This additional cost depends on the currency pair in question. Needless to say, it only serves to make an already-expensive transaction even more costly.
Bank-to-Bank vs. Other Types of Wire Transfer
Bank-to-bank transfers are the de-facto mode of wiring money, but they’re not the only option for sending large sums of cash quickly. Wire services like Western Union offer comparable wire transfer services—sometimes at a more affordable rate.
The problem with wire transfer services is that they often make money in different ways: through unfavorable exchange rates or processing fees. The advertised price of a wire might be lower than most banks, but it might not be by the time you actually process the transaction. Moreover, many aren’t as quick. Check rates and terms before sending money through a wire service.
Wire Transfers vs. Digital Payments
Digital payments are a disruptive force in the world of funds transfer. They offer the quickness and security of traditional bank-to-bank payments, with the convenience and control of funds transfer services. The result is a better way to pay and get paid, without all of the barriers, fees and waiting.
Want to explore digital payments for yourself? Schedule a demo of Veem today and see how easy it is to send money to contractors, partners, vendors and anyone else who needs funds fast.
* This blog provides general information and discussion about global business payments and related subjects. The content provided in this blog (“Content”), should not be construed as and is not intended to constitute financial, legal or tax advice. You should seek the advice of professionals prior to acting upon any information contained in the Content. All Content is provided strictly “as is” and we make no warranty or representation of any kind regarding the Content.